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Will Unstoppable Liquidity Keep Crypto Bull Run Alive Through 2026? Discover What Experts Predict!
In the latest liquidity news, Raoul Pal asserts that the cryptocurrency cycle is entering a significant expansion phase that may extend through 2026. This perspective emerged during a recent “Everything Code” masterclass, where Pal collaborated with Julien Bittel, the head of macro research at Global Macro Investor (GMI). They presented a framework linking demographics, debt levels, liquidity, and business cycles to the returns on various asset classes. Pal emphasized that cryptocurrencies and technology are uniquely positioned to outperform in an environment characterized by the concealed debasement of fiat currencies.
Pal describes the ongoing liquidity increase as “the biggest macro variable of all time.” He highlights that global governments and central banks are boosting liquidity by 8% annually to manage rising debts. This dynamic separates ongoing debasement from traditional inflation metrics, prompting investors to focus on hurdle rates rather than superficial headlines. Pal warns, “You have an 11% hurdle rate on any investment. If your investments don’t hit this rate, you are effectively getting poorer.”
The duo’s analysis commences with trend GDP, which they define as the sum of population growth, productivity, and debt growth. With a declining working-age population and subdued productivity, public debt is stepping in to fill the gap. This shift structurally elevates the debt-to-GDP ratio and emphasizes the necessity for increased liquidity. “Demographics are destiny,” Pal states, underscoring a falling labor-force participation rate that parallels the relentless rise in government debt as a percentage of GDP.
Pal and Bittel assert that liquidity mechanisms—such as balance sheets, the Treasury General Account (TGA), and reverse repos—are critical in financing interest costs that the economy cannot support organically. They explain, “If trend growth is approximately 2% and interest rates are at 4%, that gap must be monetized. It is a story as old as the hills.”
Bittel elaborates on the connection between various economic indicators, describing how GMI’s Financial Conditions Index, which combines commodities, the dollar, and interest rates, leads total liquidity by about three months. Total liquidity then influences the ISM manufacturing index by six months, which ultimately affects earnings, cyclicals, and the performance of cryptocurrencies. As Bittel notes, “Our job is to live in the future. Financial conditions lead the ISM by nine months, and liquidity leads by six.”
In this context, cryptocurrencies are not outliers but high-beta macro assets. Bittel states, “Bitcoin is the ISM,” indicating that the same dynamics affecting small-cap equities and other asset classes also apply to Bitcoin and Ethereum. As the cycle progresses, risk appetite tends to migrate first from Bitcoin to Ethereum, then into larger alternative layer-1 assets, and finally to smaller caps, coinciding with a decrease in Bitcoin’s dominance.
Pal cautions investors anticipating an “instant altseason,” advising that they consider the real economy’s phasing. “It always moves into the next safest asset first. Only when the ISM is significantly rising and dominance is falling sharply do we see the broader market rally.”
The recent period of “sideways chop” in the market reflects a substantial TGA rebuild—an external liquidity drain that disproportionately affects riskier assets. Bittel points out that the $500 billion rate of change since mid-July has removed essential momentum for crypto prices but emphasizes that this liquidity drain is approaching a turning point. He notes that timing signals suggest a reversal that could increase liquidity composites as the year progresses.
Looking ahead, Pal and Bittel believe the next twelve months are critical. Pal states, “We have $9 trillion of debt to roll over in the coming year. This will be the year of maximum money printing.” Their base case predicts policy rates will decrease in a still-challenging but improving economic cycle, with central banks focusing on unemployment and core services inflation.
For investors, the implications for portfolio construction are profound. Pal argues that “diversification is dead.” Instead, he advocates for hyper-concentration, stressing that the choice is about arithmetic survival against ongoing debasement. In GMI’s long-term outlook, most traditional assets fall short of the combined debasement and inflation hurdle, whereas Nasdaq and Bitcoin significantly outperform.
“Why own any other asset?” Pal asks. “This is the super-massive black hole of assets, which is why we are all-in on crypto. It’s the greatest macro trade of all time.”
Bittel further illustrates Bitcoin’s progress by overlaying its log-regression channel on the ISM index, showcasing how time and cycle amplitude interact. He identifies potential price targets that could reach mid-$200Ks under favorable economic conditions, indicating that longer cycles generally lead to higher price outcomes.
In summary, Pal and Bittel argue that the current cycle is fundamentally different from previous periods. Unlike the 2020-2021 boom, where both liquidity and the ISM peaked, today’s environment suggests a re-acceleration of liquidity aligned with a supportive debt-refinancing window. As we look toward the future, the experts believe the crypto landscape may experience substantial growth, with the potential for liquidity-driven expansion extending well into 2026.
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